Michigan Soft Drink Association: Make it a crime to defraud Michigan's bottle deposit system

Summary

Testimony materials from the Michigan Soft Drink Association on abuse of Michigan's bottle return law. A fact sheet states that distributors buy soft drinks in neighboring non-deposit states and Canada without paying the 10-cent deposit and resell them to Michigan retailers, costing honest Michigan distributors $10 million a year, and that unclaimed deposits of $32 million were earmarked for environmental programs in 2019. It says bills will be introduced to make it a crime to sell carbonated beverages without first initiating the deposit and to direct $1 million from the unclaimed deposit fund to enforcement. An attached commentary by Mike Mueller, Tim Sneller, Tyrone Carter and Andrew Fink describes the bill package and states that in 2019, 89 percent of deposit containers were returned.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Text recognized from a scanned document; may contain errors. Pages 5, 7, and 13 of 14 are not shown because the text could not be recognized reliably.

THE PROBLEM

Michigan's bottle return law is being abused, and it’s costing Michigan

businesses and residents jobs and money. Here’s how the scam works:

e Without paying the 10-cent deposit, unscrupulous distributors are purchasing large
quantities of soft drink beverages from neighboring non-deposit states and Canada and
reselling them to Michigan retailers.

* That 10 cents per container is pure profit for these outfits—every 24-pack sold can
generate an ill-gotten $2.40 and is driving the scam.

This isn’t a victimless crime. Honest Michigan distributors are footing the bill

to the tune of $10 million a year and many Michigan union jobs are at risk.

e When a consumer returns a container
to a store, the retailer hands over a
dime, but the store is only out-of-
pocket that dime until their empties
are picked up.

e Law-abiding Michigan distributors who
also sold soft drinks to retailers
eventually return to pick up any of the
returned deposit containers.

e For each empty picked up, they pay the
retailer a dime—a dime they believe
they had initially collected when they
first sold their goods,

e However, the retailers are also being
paid by the Michigan distributor 10
cents for any returned cans generated
by the sales from deceitful distributors.

e All of these factors hit the bottom line
of good Michigan distributors who
employ union workers across the state.
THE PROBLEM

Distributors aren't the only ones hurt. Michigan’s environment and

ultimately our residents are the ones who suffer.

e Every year, distributors write a check to the Michigan Department of Treasury accounting
for all the dimes collected on unreturned containers.

e The eleven percent of deposit containers that were not returned to stores generated $32
million in so called unclaimed deposits earmarked to fund environmental programs in 2019.

e However, that number is smaller than it should be. Dimes paid by Michigan distributors to
retailers on account of the out-of-state containers cut into the unclaimed deposits available
for environmental programs and prevent the fund from growing even larger.

THE SOLUTION :

Michigan needs to crack down on this scam and protect Michigan's bottle returns

process. Four. bilis will soon be introduced to:

e Make it a crime to sell carbonated beverages without first initiating the deposit. Making this scam

illegal is the first step in stopping this activity.
e Direct $1 million from the unclaimed deposit fund to police enforcement and ends this fraud.

e Hold those caught accountable by establishing and codifying the financial and criminal
repercussions and sentencing guidelines associated with this abuse.

IT’S TIME TO STOP THE SCAM.

\

fs. MICHIGAN
SOFT DRINK
ASSOCIATION
COMMENTARY

_ RECYCLING FORUM

Make it a crime to defraud

Michigan's bottle deposit system

BY MIKE MUELLER, TIM
SNELLER, TYRONE CARTER
AND ANDREW FINK

magine you are the owner of a

neighborhood grocery store,
gas station or party store. Some-
one waiks in and says they just
bought some pallets of soft drinks
across the state line.

Since there is no container de-
posit law in any of our neighbor-
ing states, a 10-cent deposit was
not added on to the purchase
price of each beverage when it
was purchased there.

This person tells you they can
consequently sell to you at a low-
er cost than you are charged from
your regular-Michigan Coke, Dr
Pepper or Pepsi distributor.

Over the past decade, a grow-
ing number of deceptive distribu-
tors are importing out-of-state
beverages by the truckload into
Michigan and selling them to re-
tailers without first initiating the
depasit.

This. practice costs Michi-
gan-based beverage companies
more than $10 million annually —
robbing Michiganders of jobs and
the state’s unclaimed deposit fund
of millions of dollars each year.

Our bill package seeks to stop
this deceptive practice.

In 2019, 89 percent of the con-
tainers on which a deposit was
paid were returned. The 11 percent
of deposit containers which were
not redeemed at Michigan stores
generated nearly $43 million.

Approximately 25 percent of
that fund (roughly $21 million)
was distributed to retailers to
help with a smail portion of their
jabor and machine costs.

The other 75 percent — about
$32 million — is captured by the
state and sent to the Department

Left to right:State Rep. Mike Mueller is a Republican from Linden.
Rep. Tim Sneller is a Democrat from Burton. Rep. Tyrone Carter is a

Democrat from Detroit. Rep. Andrew Fink is a Republican from
Hillsdale.

of Energy, Great Lakes and Envi-
ronment, which uses the funds
for employees overseeing envi-
ronmental cleanup sites.

When we stop those scamming
the deposit law by bringing in
out-of-state containers on which
no deposit was initiated, the re-
demption rate will stop being ar-
tificially inflated by the imported
cans, and the state will gain more
revenue.

There are now only 10 states
with a bottle de-
posit law. As a
state surround-
ed by nonde-
posit states, we
are finding bev-
erages imported
from Ohio, Indiana, Illinois, Wis-
consin and even Canada.

Often, these operations move
product out of nondescript ware-
houses into convenience and
party stores throughout the state.

The states that have been suc-
cessful in investigating and ap-
prehending those who are ma-
nipulating deposit laws have only
been successful when they made
it a priority and devoted the re-
sources necessary to conduct the
kind of surveillance and investi-
gative work needed to bring a

case,
Our legislation seeks to do the
following:

> Make it a crime to sell carbonat-
ed beverages without first initiat-
ing the deposit.

> Give law enforcement the tools
to catch those who break the law
by directing $1 million from the
state’s unclaimed deposit fund to
the Michigan State Police and lo-

A GROWING NUMBER OF DISTRIBUTORS
ARE IMPORTING OUT-OF-STATE
BEVERAGES 8Y THE TRUCKLOAD,

cal police agencies.

>Hold those performing these
acts accountable by establishing
and codifying financial and crim-
inal repercussions and sentenc-
ing guidelines associated with
this abuse.

Through passage of these bills,
we can ensure we are purchasing
soft drinks made and delivered by
Michiganders and stop those cur-
rently robbing from the state’s
unredeemed deposit fund.


File and source

File

2021-05-27_testimony_rule-2021-derek-bajema_47390.pdf

Size

1,126,678 bytes

SHA-256

19e7b63b2a2e60038f14ae300a0c49530d64239fcdee70d4834db139b55a318b

Our copy

2021-05-27_testimony_rule-2021-derek-bajema_47390.pdf

Original

No public link identified.